Islamic economics Class Lecture-1

Class Lecture-1

Principles of Islamic economics (Econ-2403)

Definition: Economics

1. Economics is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people.

2. the study of how society manages its scarce resources

Scarcity:

1. The limited nature of society’s resources
2. Scarcity means that society has limited resources and therefore cannot produce all the goods and services people wish to have.
3. A situation of scarcity is one in which goods are limited relatives to desires.

Nature of economics: 2 types

1. Positive economics: it describes the facts of an economy.
2. Normative economics: it involves value judgments.

Branches of economics:

1. Microeconomics
2. Macroeconomics
3. Islamic economics

Definition: Microeconomics

1. Microeconomics (from Greek prefix micro- meaning "small" + "economics") is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources.

2. It concerned with the behavior of individual entities such as markets, firms and households.

3. The study of how households and firms make decisions and how they interact in markets.

Definition: Macroeconomics

1. Macroeconomics (from Greek prefix "macro (o)-" meaning "large" + "economics") is a branch of economics dealing with the performance, structure, behavior, and decision-making of the entire economy. This includes a national, regional, or global economy.

2. It concerned with the overall performance of the economy.

3. Macroeconomists study aggregated indicators such as GDP, unemployment rates, and price indices to understand how the whole economy functions. Macroeconomists develop models that explain the relationship between such factors as national income, output, consumption, unemployment, inflation, savings, investment, international trade and international finance.

4. The study of economy-wide phenomena, including inflation, unemployment, and economic growth.

Definition: Islamic economics

1. Islamic economics can be defined as that part of Islamic code which studies as a process, economic, social and moral behavior in an integrated manner in relation to production, distribution and consumption of goods and services.

2. Islamic economics refers to the body of Islamic studies literature that "identifies and promotes an economic order that conforms to Islamic scripture and traditions," and in the economic world an interest-free Islamic banking system, grounded in Sharia's condemnation of interest (Riba).

Basis: Behavioral norms" derived from the Quran , Sunnah,Ijma and Ijtihad

Islamic Economics (6^th -14^th Century):

Begun: The practice of Islamic Economics was begun in the state of Medina in the 6th century.

Contributors: After that, the process of Development of this discipline was handled by the different scholars and Economists in different centuries. many of them were Abu Yusuf (731-798), Al Farabi (873-950), Al Ghazali (1058-1111), Al mawaridi (1675-1158), Nasir Al-Din Al-Tusi (1201-1274), Ibn Taymiyyah (1263-1328), Ibn Khaldun (1334-1406) History of the World (Kitab al-Ibar), Asaad Davani (1444).

Topics: They amplified the Ideas of consumer theory, supply and demand, Elasticity, Taxation (Khaldun-Laffer Curve (the relationship between tax rates and tax revenue) etc in the light of Islamic Economics.  Ibn Khaldun was considered as a Forerunner of modern economics.

Books: History of the World (Kitab al-Ibar), division of labor, and macroeconomic forces of population growth, human capital development, and technological developments effects on development.

Recent Contributors:

The tools of Islamic economics are also employed in modern economics by some economic thinkers. Among of them, the contributions of  M .Umer chapra (Islam &economic challenges), Monzer Kahf. Najat Ullah Siddiqui, M.A. Mannan,  Fahim Khan,Anas Zarqa are well mentioned to the recent world.

 Comparative economic analysis:

Types of economy:

1. Market Economy: is one in which individuals and private firms make the major decision about production and consumption Market economy: an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services

Example-UK (came to close in 18^th century)

2. Laissez – faire economy: the extreme case of a market economy, in which Governments keeps its hands off economic decisions,is called a Laissez – faire economy.
3. Command Economy: is one in which the government makes all important decisions about production and consumption.

Example-ex-soviet union

3. Mixed Economy: it includes the elements of both market and command economy. Example-almost all economy of the world,Bangladesh,India etc

4. Islamic Economy: the economy which runs according to the law of welfare, justice and Islamic Shariah.

Example-Medina state in 7^th century, Iran (came to close)

Attention: All class lecture available at: www.islamiceconomicsbd.blogspot.com